The automotive electronics business, which LG Electronics is growing as a new growth engine for the future, is becoming visible with significant achievements such as the establishment of a joint venture with Magna and the achievement of the largest ZKW order.
LG Electronics is divided into three axes: VS Business Headquarters (focus on infotainment), Austrian company ZKW (Lamp) acquired in 2018, and Canadian auto parts maker Magna International and LG Magna E-Powertrain (Powertrain), which is expected to be established, and future car parts Business is in progress.
■ Established a joint venture with Magna in July
LG Electronics held an extraordinary board meeting at the end of last year and decided to establish a joint venture in the field of electric vehicle powertrain with Magna International, the world’s third-largest auto parts maker.
LG Electronics is in the process of approving the division plan for electric vehicle powertrain related projects at the regular shareholders’ meeting held on the 24th of next month. The joint venture will be officially launched in July this year when the stockholders’ meeting approves the material division.
Regarding the establishment of the joint venture, LG Electronics predicted that “electric vehicle drive parts will grow by 50% or more per year through the production of existing orders until 2023, and sales from new orders will occur as early as 2024.”
“This collaboration is limited to electric vehicle powertrain (drive motor, inverter, battery pack parts) in the short term, but in the mid to long term, LG Chem (battery), LG Innotek (camera, V2X module, 3D sensing module) , General motors), and LG Hausys (interior materials).
■ ZKW achieves the largest orders over 10 trillion won
In 2018, the first year of the inauguration of LG Group chairman Koo Kwang-mo, LG Electronics invested about 1 trillion won to acquire ZKW, an Austrian automotive headlamp manufacturer. At the end of 2019, the vehicle lamp business within the VS business division was transferred to ZKW and integrated.
ZKW announced earlier this month that it has secured the largest order balance ever. Although the specific order balance has not been disclosed, the industry estimates that ZKW has secured orders over 10 trillion won at present.
ZKW is setting up new offices in the Czech Republic and China in response to this market demand. Ten overseas branches will be expanded in early May through a new development office in Olomouc, Czech Republic and a sales and development office in Shanghai, China.
■ VS Business Division is imminent to turn profitable
LG Electronics established the VS Business Headquarters (then VC Business Headquarters) in 2013 to foster the auto parts business as a future growth engine.
LG Electronics expects the VS business division’s earnings to turn to the black after 2H. The sales of the VS Business Division recorded 1.91 trillion won in the fourth quarter of last year, an increase of about 550 billion won from the same period last year. The deficit also sharply decreased from 66.3 billion won in the same period last year to 2 billion won.
Stock prices have a similar outlook. Daishin Securities predicted that the VS business division’s sales would increase to 7.6 trillion won in 2021 and 10.7 trillion won in 2023. Meritz Securities is also expected to reach 7.5 trillion won in 2021 and 9.3 trillion won in 2022.
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Meanwhile, LG Electronics announced that’Aluto’, a joint venture established with Swiss-based global software company LookSoft, will be launched next month.
Based on the WebOS Auto platform, Aluto introduces an integrated infotainment system for vehicles including head unit and rear seat entertainment system (RSE) to the market.